MDC add-on prices, SkillSoft, Hillman slate, Mylan up next; Chesapeake gains on debt plan

By Paul Deckelman and Paul A. Harris

New York, May 11 - High-yield bond issuers, at least temporarily spooked by investor angst over the debt situation in Europe and the resulting extreme recent volatility in equities, cautiously put their toes back into the water on Tuesday with the first pricing in three sessions, since last Thursday. Admittedly, Toronto-based marketing and communications company MDC Partners, Inc.'s offering wasn't very large - just $65 million - and it in fact was an add-on offering to an existing deal. But a pricing is a pricing.

After the issue came to market, it was heard to have firmed slightly.

Continuing to come back to life after the shock of the past few sessions, the primaryside saw two other prospective new deals emerge, from business software provider SkillSoft plc, doing a $310 million eight-year deal through a pair of subsidiaries, and from Hillman Group, Inc., a manufacturer of small hardware items selling $150 million of eight-year paper, with both deals expected to price next week.

On a more immediate basis, price talk came out on Pittsburgh-based pharmaceuticals producer Mylan Corp.'s $1 billion two-part deal, which is expected to price some time after the books close on Wednesday morning.

Also possibly on tap for pricing during the session is Macau casino operator MCE Finance Ltd.'s $600 million offering of eight-year bonds.

Apart from the new-issue front, a trader described Chesapeake Energy Corp.'s bonds as "pretty active" in the wake of the Oklahoma City-based energy exploration and production company's announcement late Monday that it would raise some $5 billion of capital in order to repay up to $3.5 billion of senior debt.

Primary still wary

Unsurprisingly, given recent capital markets volatility, the primary market remained mostly quiet, said a syndicate official, adding that issuers and dealers are looking for one to two consecutive days of stability before going forward on the new issue front.

The new dollar-denominated Ineos Finance plc 9% senior secured notes due 2015, which priced at par last Thursday in a $570 million issue were at 99½ bid on Tuesday afternoon.

New issues tend to be outperforming the rest of the market, the syndicate official said.

However that is cold comfort for investors who bought the deal at par and subsequently watched the price slip.

Investors will likely remain on the sidelines until prices reverse direction, making it more likely that new issues will hold issue price or improve, the official remarked.

MDC prices add-on

The Tuesday primary market saw the first issuance since last Thursday.

MDC Partners Inc. sold a $65 million add-on to its 11% senior unsecured notes due Nov. 1, 2016 (B2/B+) at 104.0, at the cheap end of the 104 to 106 price talk.

Goldman Sachs & Co. ran the books for the bank debt refinancing and general corporate purposes deal.

Mylan talks $1 billion

Meanwhile, Mylan Inc. set price talk for its $1 billion two-part offering of senior notes (B1/BB-/).

The Pittsburgh-based generic and specialty pharmaceutical company talked a tranche of seven-year notes to yield 7½% to 7¾%, and talked a tranche of 10-year notes to yield 7¾% to 8%.

Tranche sizes remain to be determined.

The deal is set to price on Wednesday.

Goldman Sachs & Co., Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are joint bookrunners for the bank debt refinancing deal.

Also on deck to price Wednesday is MCE Finance Ltd. with a $600 million offering of eight-year senior notes (B1/B+).

The deal was talked on Monday with a yield in the 10½% area at a to-be-determined discount.

In addition to the price talk, the company modified its bond covenants.

Deutsche Bank Securities, Bank of America Merrill Lynch, RBS Investment Bank, ANZ Investment Bank, Barclays Capital, Citigroup, Commerz, Credit Agricole, NAB Securities and UBS Investment Bank are the joint bookrunners.

SkillSoft plans $310 million

Meanwhile the dealers rolled out a new pair of eight-year offerings on Tuesday.

SSI Investments II Ltd. and SSI Co-issuer LLC, financing units of Dublin, Ireland-based SkillSoft plc, expect to price a $310 million offering of eight-year senior unsecured notes (Caa1/B-) late in the May 17 week.

The deal kicked off with an investor call on Tuesday.

Morgan Stanley, Barclays and Deutsche Bank Securities are joint bookrunners.

Proceeds, together with a new $365 million credit facility and an equity contribution, will be used to fund the acquisition of SkillSoft by an investor group comprised of Berkshire Partners LLC, Advent International Corp. and Bain Capital Partners LLC.

Hillman to start roadshow

Elsewhere, Hillman Group, Inc. will begin a roadshow on Wednesday for a $150 million offering of eight-year senior notes (B3/CCC+).

The roadshow wraps up on May 18.

Barclays Capital and Morgan Stanley are joint bookrunners.

Proceeds will be used to help fund the LBO of the company by Oak Hill Capital, and to refinance existing debt.

MDC up in trading

After the new MDC Partners 11% add-on notes due 2016 priced, a trader heard them quoted at 104½ bid - up from the 104 level at which the deal had come to market.

Recent new deals still lower

Traders saw several of the recently priced deals continuing to trade well below their issue prices - par in most cases - after having been caught up in the carnage last week.

One quoted Beazer Homes USA Inc.'s 9 1/8% notes due 2018 "still" at 96 bid, 96½ offered. The Atlanta-based homebuilder had priced its $300 million issue of the bonds at par just a week ago.

At another shop, Lantheus Medical Imaging Inc's 9¾% notes due 2017 were quoted trading at 94 bid, 96 offered, even though the Billerica, Mass.-based specialty pharmaceutical maker's $250 million deal had priced at par, also a week ago.

Ineos Finance plc's 9% notes due 2015were around 99 bid, par offered - down from their par issue price, though up a little from recent lows around 981/2-99.

Market indicators soften up

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index drop by ¼ point on Tuesday to 97¼ bid, 98¾ offered, after having zoomed by a full 3 points on Monday in bouncing back from the big declines seen last week.

The KDP High Yield Daily Index continued its recent volatile path, quoted down some 20 basis points on Tuesday to 71.15, after having jumped 58 bps on Monday to bounce back from a string of recent large declines. The index's yield meantime widened by 5 bps on Tuesday to 8.46%, after having tightened by 19 bps on Monday and having gapped out badly over the several sessions before that.

Advancing issues fell back behind decliners on Tuesday, though by only a relative handful of the more than 1,400 issues tracked. On Monday, they had broken a four-session losing streak, jumping ahead of decliners by a better-than seven-to-five ratio.

Overall market activity, represented by dollar-volume levels, rose by 6% on Tuesday, after having slid by around 25% on Monday from the levels seen the previous session.

A trader described Tuesday's session as "kind of a mish-mash of stuff today."

"It was a kind of a weird thing," he continued, "you got bits and pieces trading all over the place. We were seeing a lot of names that we hadn't seen in a while, that are kind of reemerging. It's not just the three or four new issues that got priced the last two or three days - it's old names from the past that are popping their heads up.

"You're seeing $3 million, $5 million here, a couple of million there. It's interesting how people are adding [to their positions]."

He further stated that it looked like there was more selling going on, "but not the huge amounts, like you had last week."

The carnage seen last week - particularly during Thursday's session, when a list of names too numerous to quote was seen almost universally down at least 3 to 5 points, and in some cases even more, in active trading - will still be in the heads of investors for a while, he predicted.

"A lot of people are just sitting back now. You saw how quickly the market lost its legs last week? It's like getting knee surgery - you can't use your knee for a while and now you're back on it. How strong is this market going to be, compared to how quickly it can just drop in the course of three or four days?

"Can the market stand on its own two legs?"

He said that it was "kind of shocking how, in the course of two or three days, you had things down so much, and then, for it to come back [on Monday]. Stuff is trading - but it's not the huge, strong rally some may think it is. The jury is still out."

A second trader said that after last week's debacle, "the market came back a little bit. A lot of the volatility has brought out the buyers and sellers. Volume has picked up pretty dramatically from - obviously - last week, when there was absolutely nothing going on except for some Street trading, guys hitting bids and that kind of thing."

In Tuesday's dealings, he said, "the market kind of opened up on the lower side this morning, then kind of gyrated higher pretty much all day.

"I would say we've gotten back not 100% of what we lost, but a good bit of it," although he added that it was "hard to tell."

He noted the CDX Series 14 had enjoyed "a pretty nice move back up," after having been down as much as three points towards the end of last week. "I think cash is a little bit behind, but it's catching up."

Among the issues doing well, he said, were such names as Cablevision, Bombardier and Crown Castle.

"It's pretty much across the board," he proclaimed "Pick a name. They're probably all up 2 3 three points from the lows."

That having been said, though, he added that there was 'not a ton" of activity going on. "There are no new issues, and in the secondary, it's pretty much just guys scrambling around, looking for stuff that they can pick up cheaply."

Chesapeake is a champ

A trader called Chesapeake Energy's bonds "pretty active" on Tuesday as investors reacted to the company's announcement late Monday that it would raise some $5 billion of capital via asset sales and issuance of convertible preferred stock in order to repay up to $3.5 billion of senior debt and to increase its operations in oil and gas liquids - as opposed to its current major focus on natural gas - by up to $1.5 billion. Chesapeake executives additionally held a morning conference call to further outline their ambitious plans, which include doubling the company's valuation within the next two years (see related story elsewhere in this issue).

The trader saw the company's 9½% notes due 2015 as the most active Chesapeake issue, pegging them up by ½ point to 109½ bid, on "high volume." He also saw the 7¼% notes due 2018 up by ¾ point to a full point at 99¾ bid, on "large volume."

The company's 6 5/8% notes due 2016, he said, were "up the most" of any issue in the capital structure, gaining between 1 and 1½ points to finish at 99½ bid, par offered.

Another trader, though, saw the 91/2s up a full 3 points on the session at the 109 bid, 110 offered level.

A third trader estimated that the company's bonds were up around 2¾ points to a full 3 points, across the board. He saw the 91/2s climbing to 109¼ bid, 109¾ offered from Monday levels at 106½ bid, 107 offered. He said the 6 7/8% notes due 2016 had meantime moved up to 99 bid, par offered

Lively trading in L-3

Apart from Chesapeake, a trader said that one of the big names of the day, in terms of trading activity, was in L-3 Communications Corp., the New York-based high-tech defense contractor.

He saw its 6 3/8% notes due 2015, which were last trading around 100¼ bid.

"Everything traded between par and 100¼ today on huge volume," estimated at more than $30 million. He called the bonds down "slightly," between ¼ and ½ point, on no fresh news out about the company.

GM goes for a ride

A trader saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 "bouncing around today," quoting those bonds as gyrating between a low of about 33¾ and a high of 343/4, finally going out at the latter, higher price, although he said "that bid was hit a couple of times."

At another desk, a trader said the GM benchmarks gained ½ point on the day at 34½ bid 35 offered.

He also saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 down a point at 91 bid, 92 offered.

A trader said that GM was "pretty active." He said there had been a "pretty good sized seller," keeping the bonds lower last week, but now, they had moved back up to the 34 level.

But late in the day, a trader at another shop was quoting the GM benchmarks as having pushed all the way up to 38 bid, as "investors are showing more comfort in investing in the auto space. Confidence in the sector is rising."

Trico troubles tighten bonds

A trader saw Trico Marine Services Inc.'s 11 7/8% notes due 2014 as having tightened to a 93-96 bid context, from a very wide 90-96 range previously. "There seemed to be buyers out there, looking for the paper," he noted.

That activity followed the news that the largest shareholder in the Woodlands, Tex.-based provider of marine services to the energy industry had called for Trico's chief executive officer, Joseph Compofelice, to walk the plank.

Kistefos AS, which holds an 18% stake in Trico, said in a statement that the ouster of Compofelice was "critical to restoring Trico's credibility and saving the company." It claimed that acquisitions undertaken on Compofelice's watch were "misguided, ill-timed and disastrous," leaving Trico holding the bag on more than $1 billion of debt. Trico - which did not immediately respond to Kistefos' criticism of Compofelice, warned last week that it might not be able to stay in compliance with its debt covenants over the next 12 months.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.